The Supreme Court, having concluded that the Court of Appeal had been correct, has today refused Eclipse Film Partners No. 35 LLP permission to appeal the Court of Appeal’s decision that it was not trading. Eclipse 35 was sold, to my clients at least, as a legitimate tax-deferral product. In the current climate, almost all forms of tax planning or tax-efficient investments, which are naturally ‘avoidance’ (but, very importantly, not evasion, which is illegal) have been demonised by the press and government as ‘immoral’ and even, rather dramatically, ‘evil’.
Interestingly, the Supreme Court commented that whilst they did sometimes hear appeals despite believing that the Court of Appeal had been right, in their view, the Supreme Court did not deem it appropriate to do so in this case. The refusal of permission to appeal was not unexpected, however, as the Court of Appeal rightly pointed out at the end of its judgment, the decision that Eclipse 35 was not trading could have devastating financial consequences for those who invested.
In a nutshell, it is a possibility that, having invested sums of around £100,000 – £300,000, the investors could face multi-million pound tax bills for profits they have never received.